United States Court of Appeals For the Ninth Circuit

No. 9251

IN THE / ‘,
United States Circuit Court of Appeals

For the Ninth Circuit

JaMES A. Ackroyd, Dwicut 8. BricHaM,
Morris F. LaCroix, EARLE L. Carrer, J.
EDWARD STEVENS and FRANK EK. NELSON,

Appellants,
vs.
WINSTON BROTHERS COMPANY
(a corporation),
Appellee,
and
Brapy IRRIGATION CoMPANY
(a corporation),
Appellant,
VS.
WInston BROTHERS COMPANY
(a corporation),
Appellee.

BRIEF OF APPELLANTS, JAMES A. ACKROYD, DWIGHT S.
BRIGHAM, MORRIS F. LACROIX, EARLE L. CARTER, J.
yh ie D STEVENS, AND FRANK E. NELSON.

ae . STERLING M. Woop
SEP 28 1939 ee i
Roperr 1. Cooxr,
UL P. O'BRIEN, F'REDRIC MOULTON,

Security Building, Billings, Montana,

OLERK

Attorneys for Appellants, James A, Ackroyd,
Dwight S. Brigham, Morris F, LaCroix,
Earle L. Carter, J. Edward Stevens, and
Frank E. Nelson.

PBERNAU-WALSH PRINTING CO., SAN FRANCISCO

Subject Index

Page
Statement of the Pleadings and Jurisdictional Faets....... 1
mrewement Of the Case............... ccc cc cece cc enccnces 4
retin OL MIYTOPS .. 2.2... es ce cece ce en evans 10
DESO STRIL 5 gS) ach aRPIIRI Sear att a aa a 10
iL
reliminary and basic questions................ceeeceeee 10
(A)
The public character of the property involved......... 11
(B)

The effect of the controlling case of Thaanum v. Bynum
Irrigation District, 72 Mont. 221, 282 Pac. 528.......

ie
As Teton Co-Operative Reservoir Co. is a mere trustee of the
real estate involved in suit and without any beneficial
interest therein, such real estate is not subject to levy
OC OUITOM a. nb ee adeeb bee vba dete daa nee es Ons
an,
Neither levy upon nor sale under execution of the real
estate involved here may be made because of its public
character and necessary use for public purposes.........

ERT baby ho ba eh ee

16

23

Table of Authorities Cited

Cases Pages
Brady Irrigation Company v. Teton County, et al., 107
Mont. 330785 Pacm(2d) eo oU eer eee a ee Zi, 22
Brown Bros. v. Columbia Irrigation District (Wash.), 144
PRC: TA: el w. oe ee ee ee ee 13
California Iron Yards Co. v. Commissioner of Internal
Revenue (C. C.cA5S) rai Pedros 202... ee 34
Crow Creek Irrigation District v. Crittenden, 71 Mont. 66,
227 Pat, 68 3. coger en Pee Orne eco, eee 12

Eldredge v. Mill Ditch Co. et al. (Ore.), 177 Pac. 939. . .26, 27, 29
Cue v. Tidewater Canal Co., 24 How. 257, 16 L. Ed. 685...27, 29
Lindsay-Strathmore Irrig. District, In re, 21 F. Supp. 129.. 14

Madera IvrigatiousDistrict, In res2sePacy 2i2. ee 14
Mound City Land & Stock Company v. Miller (Mo.), 70

Ninh snd 63 ne or ecg aS 2S OA CS 55 OF. 6 oo » 15
Northern Pacific Ry. Co. v. Schimmell, 6 Mont. 161, 9

Paé,. COo Rete. kr vandlenn Sls a Re en 29
O’Neill v. Yellowstone Irrigation Distriet, et al., 44 Mont.

492. VOIP Pat: 283s Coe es. eee 13
Pacifie States Savings and Loan Corporation v. Schmitt,

et all (C. C. Ay Sy) N0dehed. (2d) 1002 ee ee 26
Payne v. Central Pacific Ry. Co., 255 U. S. 228, 65 L. Ed.

DOS ced dan «ad ep pe ON Ses Se, eer 4
People v. San Joaquin Valley Agricultural Assn., et al.

(Cal.), $1 Pac. 7403 oe. eee ke 36
Prineeton Mining Co. v. The First Nat’! Bank of Butte,

et ale 7 Monta 30 oe. ssc ee en eS ce 26
Sapero v. Neiswender (C. C. A. 4), 23 Fed. (2d) 408...... 25
Sherman County Irr. & Water Power & Improvement Co.

vy. Drake, et-al” (Neb) GIN 2 WwW. ol2.. ...... 2)... ee 36
Smith v. McCann, 24 How. 398, 16 lu. Ed. 714..........98 29, 26
state v. Blake s( Utah) 20) Pacsicd)ecilae......... 36
Thaanum v. Bynum Irrigation District, 72 Mont. 221, 232

Paes 528. ue ee ca ee 16, 19, 20
Townsend v. Greeley, 5 Wall. 326, 18 L. Ed. 547.......... 25

U.S. ex rel. Masslich v. Saunders, et al. (C. C. A. 8), 124
Bed. 124. 2 cece es eee 34

TABLE OF AUTHORITIES CITED ili

Pages

Walkley v. City of Muscatine, 6 Wall. 481, 18 L. Ed. 930.. 34
Whiteside v. School District No. 5, et al., 20 Mont. 44, 49

We ee Se ck oo ss Cee ey Os bs eh oe oe eS 35, 36

Statutes and Codes
1935 Civil Code of Montana:

Spor STR TIO » Peele a see aa eT 11
SACI “7A ae 11
et, TG! Sr 2
eM oc gh. ecw cide Cea ye eens waned essed 12
SS SLLIEL “TAC, Sal lie a i!
Mavcmor Wontana, 1909, Chapter 146..................058. 11

Revised Codes of Montana, 1921, Seetion 7174, subd. 3,
as amended by Chapter 157, Laws of Montana, 1923... .17, 21
Revised Codes of Montana, 1935:

coontucul (CUED ea as Sere ee ary errr 17, 21
Dee COMES oe in ee eR sed ee 20
UME EMM 0) UM ge re eee Say oO eis coe 4s a wv 20021
fo git, GEA YA
TM RUM ees ee kh sc oS Sew a eee 32
co inne) GLY 0 I A Se rere 32
Mersecodes, Title 28, Section 41, subd. 1................. 3
Mmm omeddes, Title 28, Section 225... ......0..0. ccs e eee eee 4
Texts
5 American & English Annotated Cases, note, p. 512...... 33
- 800), ANIITG, Re Wt.) a 24
PMR OAT, 450. oo ee ce eee tenes 34
Peeper sUris, Par, 83.2.0... ce cee ec eee eect een eees 25
Pmeompme Juris, Par, JOD............0 0c cece eee eee ees 33
Pepe orpus Juris, Par. 653, p. 1103..................+-+++ 82, 34
Lewis’ Sutherland Statutory Construction, 2nd Ed., Vol. 2
eCNON ea aae cs eee es ee eee 34
MecQuillin Municipal Corporations, Vol. 3, Par. 1160, Vol.
oe, GSO Sag TT 35
eM Par 22, p. 125. 0... 62. ee ee ce et eee 25
Memmi Par. 43... ce ee cece eee ee en name 3a

1S iy ig Te Ss 5 CC 2 33

No. 9251

IN THE

United States Circuit Court of Appeals
For the Ninth Circuit

JaMES A. Ackroyp, Dwicut 8S. Bricuam,
Morris F. LaCrorx, Earte L, Carrer, J.
Epwakb STEVENS and FRANK E. NELSON,

Appellants,
VS.
Winston BrorHers COMPANY
(a corporation),
Appellee,
and
Draby IRRIGATION COMPANY
(a corporation),
Appellant,
VS.
Winston BrorHers COMPANY
(a corporation),
Appellee.

BRIEF OF APPELLANTS, JAMES A. ACKROYD, DWIGHT S.
BRIGHAM, MORRIS F. LACROIX, EARLE L. CARTER, J.
EDWARD STEVENS, AND FRANK E. NELSON.

STATEMENT OF THE PLEADINGS AND
JURISDICTIONAL FACTS.

This action was instituted in the District Court of
the United States for the District of Montana by Ap-

2

pellant Brady Irrigation Company, a corporation, as
Plaintiff, against the Appellee Winston Brothers Co.,
a corporation, ‘eton Co-Operative Reservoir Co., a
corporation, and Bynum Irrigation District a public
corporation, as Defendants. The bill of complaint
(also denominated a petition for declaratory judg-
ment) (Tr. 3) alleges the requisite diversity of citizen-
ship. The controversy, as disclosed by the bill of com-
plaint, is between the Appellant Brady Irrigation
Company, a citizen and resident of the State of Mon-
tana, and the Appellee, a citizen and resident of the
State of Minnesota. The remaining Defendants, citi-
zens and residents of the State of Montana, were
named Defendants, pursuant to Equity Rule 37, by
reason of their refusal on demand to join as Plaintiffs
in the prosecution of the suit. The prayer of the bill
of complaint is, substantially, for a declaratory judg-
ment that the Appellee under a certain judgment ob-
tained by it in a Montana state court, has no hen
upon or right to sell certain real estate in which
Brady Irrigation Company and Teton Co-Operative
Reservoir Co., as well as Bynum Irrigation District,
have an interest. That real estate is necessarily used
as a reservoir, dam-site, etc., to supply the three last
named corporations with water for irrigation pur-
poses.

The Appellants James A. Ackroyd, Dwight S.
Brigham, Morris F. LaCroix, Earle LL. Carter, J.
Edward Stevens and Frank E. Nelson, hereinafter re-
ferred to as the Appellants, Ackroyd, et al., intervened
by leave of court and joined the Appellant Brady

3

Irrigation Company in a demand for a declaratory
judgment. The said Appellants Ackroyd, et al., are
non-residents of the State of Montana and have a sub-
stantial interest in the matter in controversy in that
certain bonds owned by them, aggregating $923,000 of
principal, and issued by Bynum Irrigation District
would be rendered worthless if the Appellee were per-
mitted, under its said state court judgment, to sell the
real estate of Teton Co-Operative Reservoir Co. upon
which a hen by virtue of that judgment is claimed.
That real estate is an essential part of an irrigation
system that provides the only source of water supply
for the irrigation of lands in Bynum Ivrigation Dis-
trict, to which lands the Appellants Ackroyd, et al.
must look for the payment of their bonds. Without
water from such irrigation system those lands would
be practically worthless.

The Appellee attacked the bill of complaint of
Brady Irrigation Co. and the bill of intervention of
the Appellants Ackroyd, et al., by separate motions to
dismiss which were sustained and thereupon judgment
of dismissal of the action was rendered. The action
has been treated at all times as one for equitable relief
by declaratory judgment.

The jurisdiction of the District Court of the United
States for the District of Montana is based on U.S.
Codes, Title 28, Section 41, subdivision 1, which pro-
vides that such court shall have original jurisdiction
where the matter in controversy, exclusive of interest
and costs, exceeds the sum or value of $3,000 and is
between citizens of different states.

4

The jurisdiction of this court is based on U. S.
Codes, Title 28, Section 225, which provides that the
Circuit Courts of Appeals shall have appellate juris-
diction to review by appeal final decisions of the dis-
trict courts.

STATEMENT OF THE CASE.

The following is a resume, made as brief as possible,
of the facts pleaded in the bill of intervention. The
Appellants Brady Irrigation Company and Ackroyd,
et al., have appealed separately (Tr. 95 and 98) from
the judgment (Tr. 94) dismissing the action and, by
separate briefs, will present their several contentions
in this court. This statement of the case relates only
to the bill of intervention of the Appellants Ackroyd,
et al. and to the contentions of such Appellants.

Inasmuch as the action was disposed of in the trial
court upon motions to dismiss, the allegations of the
bill of intervention of the Appellants Ackroyd, et al.,
must be taken as admitted for the purposes of this
appeal.

Payne v. Central Pacific Ry. Co., 255 U.S. 228,
65 L. Ed. 598 and 601.

Bynum Irigation District is a public corporation of
the State of Montana. It has been engaged in business
as a public irrigation district ever since on or about
the year 1925, and, primarily, to provide lands within
the district with water to irrigate the same. On July
Ist, 1925, Bynum Irrigation District issued, negotiated

and sold its 6% gold bonds, aggregating the principal
amount of $1,000,000, and the Appellants Ackroyd, et
al., own $923,000 of the principal amount of those
bonds, none of which has been paid.

Teton Co-Operative Reservoir Co. is a Montana cor-
poration which was organized primarily to make water
appropriations under the laws of Montana and to dis-
tribute water for the irrigation of lands within the
state. That company has made appropriations of
water, has constructed a reservoir into which waters
have been diverted and impounded and has distributed
water therefrom to large tracts of land for irrigation
purposes, in the conduct of its business. The said
Teton Co-Operative Reservoir Co. has acquired and
owns real estate in Teton County, Montana, upon
which it has constructed improvements, consisting of
the aforesaid reservoir, embankment for the same,
dams, headgates, canals, and all other necessary
structures for the proper diversion, impounding and
distribution of water for irrigation purposes, and all
of such real estate and the appurtenances are needed
by the company for the conduct of its business. Fur-
thermore Teton Co-Operative Reservoir Co. has en-
gaged in no other business than the appropriation,
diversion, impounding and distribution of water for
the irrigation of lands, and that business has been con-
ducted at all times without profit to the said company
or its stockholders, water having been distributed by
the company at the actual cost of the service and for
the use of its stockholders and no other persons whom-
soever. Fach share of capital stock of Teton Co-

6

Operative Reservoir Co. represents the right of the
owner thereof to an undivided one-thousandths part
of water appropriated, impounded and distributed by
the company and the ownership of a right to such
water for the irrigation of lands. It should be par-
ticularly noted that Teton Co-Operative Reservoir Co.
has been operated at all times since its organization:
“Only as an instrumentality or agency of its
stockholders for the appropriation, impounding

and distribution of water for the irrigation of
lands.’”’ (Tr. 64.)

In 1925 Bynum Ivrrigation District was wholly with-
out water for the irrigation of lands within its
boundaries, and then acquired, from the proceeds of
the aforesaid million dollar bond issue, 804 shares of
the capital stock of Teton Co-Operative Reservoir Co.
to the end that Bynum Irrigation District might ac-
quire an adequate supply of water for the irrigation
of lands within the district. These 804 shares con-
stitute 80.4% of the issued and outstanding capital
stock of the said Company. Before this stock pur-
chase was consummated the right of Bynum Irriga-
tion District to thus provide itself with water for
irrigation purposes was tested by a case, brought by
one Thaanum, that went to the Supreme Court of
Montana. That court, by its final decision, sanctioned
the purchase of the stock of Teton Co-Operative Reser-
voir Co. and declared that the district had the power
and authority to make the purchase. The said court
in its decision sustained the action of Bynum Irriga-
tion District, in the acquisition of a water supply

7

through the purchase of stock, and by virtue of a state
statute which gave the district the ‘‘power * * * to
acquire by purchase, lease, or contract, water and
water rights’’, etc., but that statute did not in terms
mention such a stock purchase as the District made.

Ever since 1925 Bynum Irrigation District, as the
owner of 804 shares of the capital stock of the Teton
Co-Operative Reservoir Co., has controlled that com-
pany and its business and affairs and has operated the
company for the use and benefit of Bynum Irrigation
District and the few remaining stockholders of the
company, the latter holding only 19.6% of its stock.

The lands within Bynum Irrigation District would
be arid and dry and have negligible value without the
water and water rights acquired by the purchase of
the capital stock of Teton Co-Operative Reservoir
Co., and the value of such lands without such water
would be wholly insufficient to enable Bynum Irriga-
tion District, by the assessment of the lands, to pay
the bonds of the Appellants Ackroyd, et al., or any
substantial portion thereof.

In 1927 the Appellee acquired from ‘Teton Co-
Operative Reservoir Co. the latter’s promissory note
which represented an indebtedness incurred in and
about the conduct of its corporate business and affairs.
At the time the indebtedness was ineurred, and when
the promissory note mentioned was executed and de-
livered, the Appellee then and there well knew that
Teton Co-Operative Reservoir Co. was the instru-
mentality and agency through and by which Bynum
Irrigation District supplied water for ivvigation pw

8

poses to lands in the district and that the District
had no other means of supplying water to the same. It
is also alleged in this connection in the bill of interven-
tion of the Appellants Ackroyd, et al., that the Ap-
pellee then knew all of the other matters and things
above mentioned in this resume, and pleaded in the
said bill of intervention.

The Appellee brought an action upon the promissory
note mentioned and recovered a judgment against
‘Teton Co-Operative Reservoir Co. in a Montana state
district court. As a result Appellee claims a len
under the judgment upon the real estate above-
mentioned, held by Teton Co-Operative Reservoir Co.,
and necessarily used for the impounding and distribu-
tion of water and for the irrigation of lands in Bynum
Irrigation District. Appellee further claims the right,
under the judgment, to levy upon such real estate by
writ of execution and to cause the same to be sold at
sheriff’s sale and to deprive Teton Co-Operative
Reservoir Co. and Bynum Irrigation District of the
property, all of which said property is indispensable
to the operation of Bynum Irrigation District as a
public corporation and to the delivery of water for
irrigation purposes to the lands in the said District.

It is finally alleged in the bill of intervention that
the claims of the Appellee are without right, that a
sale of the aforesaid real estate under execution would
jeopardize and destroy the rights and liens of the Ap-
pellants Ackroyd, et al. under their bonds, and that
the Appellee is without right to cause the said real

g

estate, or any part of it, to be sold under the judgment
or under any writs of execution issued thereon.

It is on the basis of the foregoing facts, pleaded in
the bill of intervention, that the Appellants Ackroyd,
et al., claim the right, as intervenors, to join with the
Appellant Brady Irrigation Company, and to have a
declaratory judgment rendered (a) that the Appellee
is without right under its judgment against Teton Co-
Operative Reservoir Co., or under any writs of execu-
tion issued thereon, to sell, either at sheriff’s sale or
otherwise or at all, any of the real estate of the said
Teton Co-Operative Reservoir Co. and (b) that the
Appellee has no lien under the said judgment upon
the said real estate. There is also a prayer for gen-
eral relief.

In substance the Appellants Ackroyd, et al. take the
position here, as in the trial court, that the public
character of the real estate involved, in which Teton
Co-Operative Reservoir Co. has but a bare legal title,
is such that it may not be sold under the judgment
obtained by the Appellee. The only remedy the Ap-
pellee may invoke is mandamus, under the former
practice in the Federal courts, to compel the district
to levy charges as taxes, like any other public corpo-
ration, and thereby, through collection of such taxes,
to raise its proportionate part of the money required
to pay the judgment. There is a liability also on the
part of the few remaining stockholders of Teton Co-
Operative Reservoir Co. that can be enforced against
them. But it would be against public policy, contrary

10

to settled law, and without warrant of any state stat-
ute, for the Appellee to dispose of the real estate of
Teton Co-Operative Reservoir Co., by sale under the
judgment, since such a sale would make it wholly im-
possible for Bynum Irrigation District to exist and
function as a public corporation.

SPECIFICATION OF ERRORS.
Specification of Error No. 1.

The trial court erred in granting the motion to dis-
miss of the Appellee Winston Brothers Co., a corpo-
ration, directed at the bill of intervention of the Ap-
pellants Ackroyd, et al.

Specification of Error No. 2.

The trial court erred in rendering and entering its
final judgment of April 14th, 1939, dismissing this
action.

ARGUMENT.
I.
PRELIMINARY AND BASIC QUESTIONS.

Before arguing the contention that the real estate
involved is neither subject to lien nor sale under the
judgment obtained by the Appellee, there are certain
basic questions in the case that should be settled.
Thus:

1

(A)

THE PUBLIC CHARACTER OF THE PROPERTY INVOLVED.

It is alleged in the bill of intervention, and, hence,
admitted for all purposes on this appeal, that Bynum
Irrigation District, is a public corporation, duly
created, organized and existing as such under the pro-
visions of Chapter 146, Laws of Montana, 1909, and
the acts amendatory thereof and supplemental there-
to, and that ever since on or about the year 1925 the
said District has been engaged in business as an 1111-
gation district and primarily to provide the lands
within the district with water to irrigate the same.
(Tr. 59.) Chapter 146 mentioned is embraced in the
irrigation district statutes now found in the 1935
Civil Code of Montana. Section 7169 thereof, in its
final paragraph, reads as follows:

‘Every irrigation district so established here-

under is hereby declared to be a public corpora-
tion for the promotion of the public welfare.”’

Section 7201 provides:

“The use of all water required for the irriga-
tion of the land of any district formed under the
provisions of this act, together with the rights of
way for canals and ditches, sites for reservoir,
and all property required in fully carrying out the
provisions of this act, is hereby declared to be a
public use.”’

In Section 7262 it is declared that:
“The object of this act being to secure the inri-
gation of lands of the state, and thereby to pro-
mote the prosperity and welfare of the people, its

12

provisions shall be liberally construed so as to
effect the objects and purposes herein set forth.’

This statutory law establishes clearly the very public
character of Bynum Irrigation District. Any property
necessarily used by it for irrigation district purposes
would be public property, and, plainly, the character
of ownership thereof, if authorized by law, does not
affect its public character.

In addition to the foregoing statutes it should be
noted, too, that under Section 7235, relating to irriga-
tion districts, provision is made for the levy of annual
taxes by a district. By Section 7240.1, when the re-
quired taxes are not levied by the irrigation district
commissioners, the board of county commissioners 1s
required to make the tax levy for the district. In
every sense of the word an irrigation district is as
much a subdivision of the state for governmental pur-
poses as are cities, towns and school districts. Thus in
Crow Creek Irrigation District v. Crittenden, T1 Mont.
66, 227 Pac. 63, the court said:

‘‘An irrigation district organized under the laws
of this state does exercise some governmental
functions; for example, it may levy taxes * * *
which is the exercise of one of the highest preroga-
tives of sovereignty.”’

In conclusion in that case the court said:

“To summarize: An irrigation district is a
public corporation organized for the government
of a portion of the state and for the promotion
of the public welfare. It exercises essential gov-
ernmental functions, and one of its principal

13

officers is the county treasurer. It may not ex-
pend its funds without the approval of public
officers, and the interest on its bonds is not subject
to the federal income tax laws. So far as it was
possible to do so the legislature has emphasized
its public character and expressed an intention
that it shall be relieved of the ordinary burdens
which are imposed upon private enterprises.
From these considerations we think it is fairly
deducible that it was the purpose of the legislature
that an irrigation district should be deemed a
subdivision of the state within the meaning of
Section 4893, Revised Codes.’’

In Brown Bros. v. Columbia Irrigation District
(Wash.) 144 Pac. 74, the case is decided upon the
general proposition that an irrigation district is a
public body and, as the court very aptly says:

“The power to drain, irrigate, or dyke land
might have been given to the counties. If it had
been, they would have been exercising a munici-
pal function just as a city does when it paves
a limited area or district by special assessments
against the property benefited.”’

In O'Neill v. Yellowstone Irrigation District, et al.,
44 Mont. 492, 505 and 506, 121 Pac. 283, the Supreme
Court of Montana points out that the so-called
“Wright Law’’ of Califormia is similar in purpose
and character to the Montana inigation district act.
That irrigation districts in Califorma are pubhe cor-
porations, quasi municipal corporations, or state
agencies, performing governmental fimetions, — 1s
pointed out clearly, in a summarization of the Cah-

14

fornia authorities on the subject, in the case of In
re Lindsay-Strathmore Irrig. District, 21 F. Supp.
129 and 134. Among other California authorities cited
is that of In re Madera Irrigation District, 28 Pace.
272. We quote briefly from that case, to-wit:

‘‘In determining whether any particular meas-
ure is for the public advantage, it is not neces-
sary to show that the entire body of the state
is directly affected thereby, but it is sufficient that
that portion of the state within the district pro-
vided for by the act shall be benefited thereby.
The state is made up of its parts, and those parts
have such a reciprocal influence upon each other
than any advantage which accrues to one of them
is felt more or less by all of the others. A legis-
lature that should refrain from all legislation that
did not equally affect all parts of the state would
signally fail in providing for the welfare of the
publie.”’

Continuing, the court in the Madera Irrigation Dis-
trict case said:

‘*Whether the reclamation of the land be from
excessive moisture to a condition suitable for cul-
tivation, or from excessive aridity to the same
condition, the right of the legislature to authorize
such reclamation must be upheld upon the same
principle, viz., the welfare of the public and par-
ticularly of that portion of the public within the
district affected by the means adopted for such
reclamation. Whatever tends to an increased
prosperity of one portion of the state, or to pro-
mote its material development, is for the advan-
tage of the entire state. * * * The local improve-

15

ment contemplated by such legislation is for the
benefit and general welfare of all persons inter-
ested in the lands within the district, and is a
local public improvement.”’

In Mound City Land & Stock Company v. Miller
(Mo.) 708. W. 721, the Court considers the constitu-
tionality and status of drainage districts in the State
of Missouri and places them in the same class with
nvrigation districts in other states. Thus the Court
says:

‘Levees keep out the water. Irrigation canals
bring in the water. Drains take out the water.
The pubhe has an interest in each kind of such
laws. By keeping out the water, the health of
the inhabitants is conserved and the value of the
lands increased, and the revenues of the state en-
hanced. ‘Thus the state is directly interested both
for sanitary and financial reasons. The irriga-
tion laws bring in the water and make valuable
the arid lands, and thereby enhance their value,
and, hence, bring in more revenue to the state.
Thus the state has a direct pecuniary interest,
although not a sanitary interest.’’

Continuing the court says:

“California, Pennsylvania, Illinois, Michigan,
Ohio and New Jersey have reclamation laws,
based upon the same principles as our statute.
* * * Tt is competent for the state to raise up a
governmental agency for the enforcement of its
police powers and for the purpose of enhance
its revenues and carrying its revenue laws into
effect. The agency thus created is an arm of the

16

state, a political subdivision of the state and exer-
cises prescribed functions of government and is
not a private corporation in any sense.”’

It cannot be gainsaid that Bynum Irrigation Dis-
trict, as a public corporation, carries on a public work
for the promotion of the public welfare nor that prop-
erty necessary to the conduct of that work is used
for public purposes.

(B)

THE EFFECT OF THE CONTROLLING CASE OF THAANUM v.

BYNUM IRRIGATION DISTRICT, 72 MONT. 221, 232 PAC. 528.
It is alleged in paragraph XIII of the bill of inter-

vention (Tr. 64) of the Appellants, Ackroyd, et al.:
“That Bynum Irrigation District was organ-
ized for the purpose of irrigating large tracts of
land in Teton County, Montana, and that on or
about the year 1925 the said Bynum Irrigation
District, being wholly without water for the ir-
rigation of such land, made and entered into an
agreement to purchase, for a consideration of
$500,000, payable from the proceeds of the $1,-
000,000 bond issue * * * 804 shares of the capital
stock of * * * Teton Co-Operative Reservoir Co.,
being 80.4 per cent of the issued and outstanding
capital stock of the said Company, to the end that
thereby the said Bynum Irrigation District might
acquire an adequate supply of water for the ir-

rigation of the lands within the said District.”’

As the statement of the case herein makes plain
Teton Co-Operative Reservoir Co. holds the legal title
to the real estate involved in this action which the
Appellee threatens to sell under its judgment. That

ui

real estate is necessarily used by the said Teton Co-
Operative Reservoir Co. for the diversion, impound-
ing and distribution of water for irrigation purposes.

It is further alleged in said paragraph XIII (Tv.
65) of the said bill of intervention that:

“On or about the year 1925 one W. A.
Thaanum, an owner of land in the said District
(meaning the Bynum Irrigation District), in-
stituted a certain action to restrain the said Dis-
trict and its Board of Commissioners from ex-
pending any money belonging to the said District
for the purchase of the said 804 shares of capital
stock above mentioned, and that thereafter in the
said action, and on or about the vear 1925, the
Supreme Court of the State of Montana duly ad-
judged that the said District and its said Board
of Commissioners, * * * had the power and au-
thority to purchase the said 804 shares of capital
stock of Teton. Co-Operative Reservoir Co., and
that the judgment rendered is in full force, virtue
and effect.’’

The Thaanum action is the one cited in the fore-
going caption to this argument. The Supreme Court
of Montana sanctioned the purchase of shares of the
capital stock of the Teton Co-Operative Reservoir Co.
and did so by virtue of the provisions of subdivision
3, Section 7174, Revised Codes of Montana, 1921, as
amended by Chapter 157, Laws of Montana, 1923.
This circumstance is pleaded in the bill of interven-
tion and has been admitted with the other facts
pleaded, supra. The statute mentioned provides im
substance that the board of an irrigation district shall
have power and authority to acquire by purchase,

1S

lease, or contract, water and water rights, rights of
way for reservoirs, the storage of needful waters, dam
sites and appurtenances, and such other lands and
property as may be necessary for the operation of any
district system of irrigation works. It should be
borne in mind in this connection that, when this pur-
chase of stock was made, Bynum Irrigation District
had no water rights of any sort for the irrigation of
lands in the district, and, hence, that the purchase of
such stock was necessary to enable Bynum Irrigation
District to function as a public corporation.

The following further allegations of the bill of in-
tervention of the Appellants Ackroyd, et al., that have
been admitted, should also be noted, to-wit:

‘That the said Company (meaning Teton Co-
Operative Reservoir Co.) has been operated at all
times since its organization only as an instru-
mentality or agency of its stockholders for the
appropriation, impounding and distribution of
water for the irrigation of lands.’’ (Tr. 64.)

‘That the said capital stock of the said Teton
Co-Operative Reservoir Co. so purchased as
aforesaid, constitutes and is the sole source of
water supply for the said Bynum Irrigation Dis-
trict and is indispensable, in its entiretv, to the
conduct of the business of the said Bynum I[r-
rigation District as a public corporation.”’ (Ty.
65 and 66.)

‘That upon the purchase of the said shares of
capital stock of Teton Co-Operative Reservoir
Co. the said Bynum Irrigation District and its
Board of Commissioners duly apportioned water
for irrigation among the lands in the district, as

LS)

required by law, and in a just and equitable man-
ner, being the water acquired by the purchase of
the said stock, and that such water thereupon be-
came, ever since has been and now is appurtenant
to such lands and inseparable from the same.’’
(Tr. 66.)

‘‘That ever since on or about the year 1925
the said Bynum Irrigation District, as the owner
of the aforesaid 804 shares of capital stock, and
through its Board of Commissioners, has con-
trolled the said Teton Co-Operative Reservoir
Co. and its business and affairs, and has operated
the said Company for the use and benefit of the
said Bynum Irrigation District and the other
stockholders of the said Company.’’ (Tr. 67.)

Since Bynum Irrigation District necessarily ac-
quired the water stock in question and had the legal
right so to do, that stock and all it represents, namely,
the irrigation system involved, became public property
in every sense of that term. There is no difference
in fact or in law, as regards the acquisition of water
rights for Bynum Irrigation District, between the
purchase of stock of Teton Co-Operative Reservoir
Co., with the consequent control of its business and
affairs, and the purchase of the irrigation system of
that Company, consisting of the real estate here
involved and the appurtenances. The District could
lawfully acquire its water rights by either method.
In legal effect, as a result of the Thaanwm case, the
Bynum Irrigation District did acquire the irrigation
system of the ‘!'eton Co-Operative Reservoir Co. by
the stock purchase. ‘The said Company, after the

20

stock purchase was made, became a mere holding com-
pany, agent or trustee, for Bynum Ivrigation District.
Had the District purchased the irrigation system out-
right, instead of the stock, no contention could prop-
erly be made that the said system is not now used for
a public purpose. Nor could any claim be made
legitimately under such circumstances that the use of
the irrigation system to carry some surplus water
(not needed by the District) detracts from the major
use of the system for a public purpose by the District.
The acquisition of 80.4% of the stock of Teton Co-
Operative Reservoir Co., leaving only 19.6% in private
hands, creates no different condition in legal effect
than if the District had bought the irrigation system
and allowed surplus water, to the extent of 19.6%
of the entire supply, to go to a few private persons.
The law (Sec. 7204, Revised Codes of Mont. 1935)
permits a district to dispose of surplus water.

It is also proper in this connection to contend, as
we do, that the water rights, which, under the
Thaanum case, Bynum Irrigation District acquired
by purchasing a controlling stock interest in the
Teton Co-Operative Reservoir Co. are owned by
Bynum Irrigation District. The statute construed
in the Thaanwm ease authorizes the district to acquire
water and water rights. While the law provides, in
Section 7202, Revised Codes of Montana, 1935, that
the amount of water that can be beneficially used on
each tract of land in an irrigation district and that
has been apportioned to the same by the district com-
missioners ‘‘shall become and shall be appurtenant to

21

the land and inseparable from the same’’, neverthe-
less the water right itself, as property, 1s owned by
the District, as the following irrigation district stat-
utes make clear, to-wit:

(a) Sec. 7174, Par. 3, R. C. Mont. 1935, au-
thorizes a district to acquire ‘‘water rights’’;
(This is the statute construed in the Thaanum
case. )

(b) Sec. 7204 permits all surplus water ‘‘be-
longing’’ to a district to be sold by the district;
and

(c) Sec. 7217 (in the original irrigation dis-
trict act but now repealed) provides that the re-
port of the irrigation district bond commission
shall give the value of the water rights ‘‘owned”’
by a district.

Water rights, of necessity, do not exist apart from
but rather by virtue of the dams, ditches, reservoirs,
etc., that, after appropriation of water, bring about
the diversion thereof and its resultant beneficial use.
Thus, the irrigation system of Teton Co-Operative
Reservoir Co. comprises part of the ‘‘water rights”’
now owned by Bynum Irrigation District. Those
water rights are public property necessarily used by
the public corporation in question.

Attention should be called to one more controlling
authority. It is the case of Brady Irrigation Com-
pany v. Teton County, et al., 107 Mont. 330, 85 Pae.
(2d) 350. ‘There the effort had been made by the
taxing authorities of Teton County, Montana, to tax

22

the irrigation facilities of Teton Co-Operative Reser-
voir Co. that are involved in the suit at bar. Judg-
ment was rendered in the 7'eton County case, and af-
firmed on appeal, enjoining the issuance of a tax
deed to such irrigation facilities. The court brushed
aside the veil of the corporate identity of Teton Co-
Operative Reservoir Co. and held that the irrigation
facilities held by that non-profit corporation were not
subject to taxation. In effect it recognized that the
irrigation system, that Appellee here claims the right
to levy upon under execution, is but part of the water
rights owned by Bynum Irrigation District when it
said: ‘‘They (the ditches, etc.) have no independent
use’’; that is, a use mdependent of the lands in
Bynum Irrigation District, etc., that use the irriga-
tion water provided by the irrigation system.

The lower court in its decision has disregarded the
basic principles settled in the foregoing subdivisions
of the argument. Applying those principles, as must
be done in a proper disposition of this case, it will fol-
low, under the argument and authorities, infra, that
the said real estate may not be sold under the judg-
ment of the Appellee and that the judgment does not
ereate a lien upon the real estate. No question of
exemption from execution is involved. ‘The statutes
of Montana simply do not confer the right to a lien
or to a levy by execution against public property
owned and used as is the aforesaid real estate.

23

II.

AS TETON CO-OPERATIVE RESERVOIR CO. IS A MERE TRUS-
TEE OF THE REAL ESTATE INVOLVED IN SUIT AND
WITHOUT ANY BENEFICIAL INTEREST THEREIN, SUCH
REAL ESTATE IS NOT SUBJECT TO LEVY UNDER EXE-
CUTION.

Again we stress the allegations of the complaint of
intervention, admitted by the motion to dismiss, that:

‘‘Teton Co-Operative Reservoir Co. has en-
gaged in no other business than the appropria-
tion, diversion, impounding and distribution of
water for the irrigation of lands, and that such
business has been conducted at all times without
profit to the said company or its stockholders;
that water has been so distributed by the said
company at the actual cost of the service and
for the use of its stockholders and no other per-
sons whomsoever; * * * that at all times since the
organization of the said company the said capital
stock has evidenced the ownership of a right
to water for the irrigation of land * * *; and that
the said company has been operated at all times
since its organization only as an instrumentality
or agency of its stockholders for the appropria-
tion, impounding and distribution of water for
the irrigation of lands.”’ (Tr. 63 and 64.)

“That ever since on or about the year 1925 the
said Bynum Irrigation District, as the owner of
* * * 804 shares of capital stock, and through its
poard of commissioners, has controlled the said
Teton Co-Operative Reservoir Co. and its busi-
ness and affairs, and has operated the said com-
pany for the use and benefit of the said Bynum
Irrigation District and the other stockholders of
the said company.”’ (Tr. 6.)

24

In other words, Teton Co-Operative Reservoir Co.,
under the admitted facts in the case at bar, is but a
trustee holding a naked legal title to the irrigation
system that supplies water to Bynum Irrigation Dis-
trict, and the entire beneficial interest in those water
facilities is vested in the holders of stock of Teton
Co-Operative Reservoir Co., which include Bynum
Irrigation District that holds 80.4% of such stock.

In 21 Am. Jur., Executions, Par. 428, it is said:

‘It is not every legal interest that is subject
to levy and sale under execution; to support the
execution, the debtor must have a beneficial in-
terest in the property. Where the debtor has only
a naked legal title in trust for others, he has no
interest in the property that may be seized and
sold under execution, no matter how completely
he may have exercised apparent ownership over
it, unless credit was given him on the faith of
such ownership.”’

In the hght of the concluding language of the fore-
going quoted matter it should be noted again that, at
the time the indebtedness here was incurred (now
merged in judgment) the Appellee, as alleged in the
complaint of intervention:

‘‘Well knew that the said Teton Co-Operative
Reservoir Co. was the instrumentality and agency
through and by which the Bynum Irrigation Dis-
trict supphed water for irrigation purposes to
the lands in the said district and that the said
district had no other means of supplying water
to the same.’’ (Tr. 68.)

20

Upon the same page of the transcript it is further
| alleged that the Appellee also then and there knew
all the other facts and circumstances set forth and
alleged in the complaint of intervention of the Ap-
pellants, Ackroyd, et al.

Controlling and leading cases that support the rule
of the American Jurisprudence reference, supra, are
as follows, to-wit:
Smith v. McCann, 24 How. 398, 16 L. Ed. 714;
Townsend v. Greeley, 5 Wall. 326, 18 L. Ed.
D47,

In Smith v. McCann, supra, paragraph 5 of the
syllabus of the law edition report reads as follows,
to-wit:

‘Tt is not every legal interest that is made
hable to sale on a fi.fa.; the debtor must have a
beneficial interest in the property.”’

In the Townsend case, supra, certain lands were
held in trust for the inhabitants of a municipality.
The court said:

‘Trust property, thus held, is not the subject
of seizure and sale under judgment and execution
against the trustee, whether that trustee be a
natural or an artificial person.”’

Other authorities to the same effect are as follows:
23 C. J., Executions, Par. 83;
i7 &. C. £., Levy and Seizure, Par. 22, page
125;
Sapero v. Neiswender (C. C. A. 4), 23 Fed.
(2d) 408 and 406;

26

Princeton Mining Co. v. The First Nat’l Bank
of Butte, et al., 7 Mont. 530 and 539.

We have here, in Teton Co-Operative Reservoir Co.,
the type of corporation involved in Pacific States Sav-
mgs and Loan Corporation v. Schmitt, et al. (C. C. A.
9), 1038 Fed. (2d) 1002. The point presented here
was not involved in the Schnutt case. But this court
has pointed out in that case that such a corporation
as ‘Teton Co-Operative Reservoir Co. here acts ‘‘as
the agent of its stockholders in the diversion and
storage of water to be applied to beneficial use upon
their lands’’. It acts in a fiduciary capacity. Thus,
upon principle, the Schmitt case makes the doctrine
of Smith v. McCann, and the other authorities, supra,
applicable in the case at bar.

But a case directly in point is that of Eldredge v.
Mill Ditch Co. et al. (Ore.), 177 Pac. 939. In that ease
Mill Ditch Co. was a corporation organized for the
purpose of diverting water from the Malheur river
and distributing it through its ditches to its stock-
holders in proportion to the shares of stock held by
each stockholder. Each of those shares, as in the case
at bar, represented the right to a certain amount of
water. The U. S. National Bank had a judgment
against Mill Ditch Co. It levied execution upon the
property of that company, which included its water
and ditch rights, and sold the same. ‘Thereupon the
Eldredge action was brought to set aside the execution
sale and to bring about the levy of necessary assess-
ments to pay the debts of the Ditch Company. The
Oregon Court in the Kidredge case specifically applies

27

the rule that equity will not permit the levy of an
execution upon a legal title held by a debtor as trustee
for a third party, and says:

‘*A court of equity would look to the interest of
the real beneficiaries and would not permit them
to be uselessly embarrassed by the sale of the legal
title held by the debtor.”’

The court also points out in the Eldredge case that
property which is so involved with the interest of the
public that it cannot be levied upon and sold without
interfering with the rights of the public is not subject
to levy and sale under execution. The court says in
this connection:

‘“Such are the interests of corporations like
eanals and railroads, even when in some sense
held by private corporations, and the interests
held by a school district and other public and
quasi public organizations.”’

The case of Gue v. Tidewater Canal Co., 24 How.
257, 16 L. Ed. 635, is relied upon as a leading case to
support the doctrine. There a judgment creditor of
the canal company, a great thoroughfare of trade,
- caused an execution to be levied upon a house, a lot,
a wharf and canal locks belonging to the canal com-
pany. A bill was filed on the equity side of the court
to enjoin the execution sale, and the action of the
lower court in granting a perpetual injunction was
affirmed upon appeal.

After considering in the Eldredge case all of the
foregoing principles the Oregon court then says:

28

‘““It seems that all of these questions enter more
or less into this case, and all are reasons why the
property of this mutual water company held and
used for the purpose of transmitting and deliver-
ing water appropriated by them, and used upon
their respective land, ought not to be permitted to
be sold upon an execution against the water cor-
poration.

It seems to be pretty well settled, in the states
having water codes similar to that of our own
state, even in cases of public service corporations
organized for profit and selling water to the gen-
eral public, that the water and ditch rights really
belong to the individual appropriator and are
appurtenant to the lands upon which the same are
used, and that the corporation transmitting the
same is in the nature of a holding company or
agent for the true owners of the water rights.
Weil on Water Rights (3d Ed.) vol. 2, Par. 1339,
p. 1237, and authorities cited.

Tlow much more so must this be true in the
case of a mutual water company, not organized
for the purpose of selling water or as a profit
corporation, but for the sole purpose of trans-
mitting and delivering to the appropriators and
owner's of the water the quantity to which each
is entitled. The relation here on the part of the
corporation seems to be clearly that of a holding
company, trustee, or agent for the real owners of
the water who are putting it to a beneficial use
upon their lands. It would seem clearly that the
corporation in such a case had no interest in the
water or ditches which equty would pernut it to
sell and transfer to outside parties, and thereby

29

deprive the water users of the same, and, if this
could not be done by private contract, it certainly
could not be done by an involuntary sale under
execution.

‘The sale in question could work no useful pur-
pose, but would practically destroy the entire
property, and embarrass and hinder the owners
of the water and perhaps prevent them from ob-
taining it, at all.”’

The judgment of the lower court, which sanctioned
the execution sale against the Mill Ditch Co., was
accordingly reversed. The concluding language of the
court in the Eldredge case is pertinent:

‘‘In this case it would be a calamity, to that
portion of the public represented by the water
users under the ditch, if such ditch could be closed
and their water rights destroyed and transferred
by such an execution sale; and the whole com-
munity would be more remotely affected, since
they are dependent upon these (and others like
them) for the production of the necessities of life.
May it not well be that such water-serving cor-
porations are as public in their purposes and as
closely interwoven with the public interest as a
small village or a school district on the one hand,
or as a canal company considered in Gue v. Tide
Canal Co., already cited; and therefore not sub-
ject to execution against their property ?”’

An application of the principle of the Gwe case,
cited in the Hidredge case, is found in Northern Pa-
cific Ry. Co. v. Schimmell, 6 Mont. 161, 9 Pac. 889.
There the court held that an office safe at a railroad

30

depot, in which the railroad agent deposited receipts
of money and valuable papers, facilitates the opera-
tion of the railroad and cannot be seized on execution
against the company because of the interest the public
has in the continuance of the operation of the railroad.

The foregoing argument, and the controlling author-
ities considered and discussed therein, establish, with-
out more, that the Appellee is without right to levy
upon the real estate involved in the suit at bar.

Ii.

NEITHER LEVY UPON NOR SALE UNDER EXECUTION OF THE
REAL ESTATE INVOLVED HERE MAY BE MADE BECAUSE
OF ITS PUBLIC CHARACTER AND NECESSARY USE FOR
PUBLIC PURPOSES.

The public character and public use of the real
estate which the Appellee threatens to sell under exe-
cution has been established by argument, supra. Again
we emphasize in this connection the following allega-
tions of the complaint of intervention of the Appel-
lants Ackroyd, et al., which have been admitted, viz.:

‘That the said capital stock of the said Teton
Co-Operative Reservoir Co. so purchased, as
aforesaid, constitutes and is the sole source of
water supply for the said Bynum Irrigation Dis-
trict and is indispensable, in its entirety, to the
conduct of the business of the said Bynum Irri-
gation District as a public corporation of the
State of Montana.’’ (Tr. 55 and 56.)

“hat in the conduct of its business the said
company (meaning Teton Co-Operative Reservoir
pans 2

31

Co.) has acquired and now owns and holds real
estate in Teton County, Montana; that it has con-
structed improvements thereon consisting of the
said reservoir, embankments for the same, dams,
headgates, canals, and other necessary structures
for the proper diversion, impounding and dis-
tribution of waters for irrigation purposes, and
that all of the said real estate is needed by the
said company for the conduct of its business;
(Tr. 63.)

‘“That the said Winston Brothers Co. further
claims the right, under the said judgment, to levy
upon the said real estate by writ of execution and
to cause the same to be sold at sheriff’s sale and
to deprive the said ‘Teton Co-Operative Reservoir
Co. and the said Bynum Irrigation District of the
said property, all of which said property is indis-
pensable * * * to the operation of the said Bynum
Irrigation District as a public corporation and to
the delivery of waters for irrigation purposes to
the land in the said district.”’

It is the contention of the Appellants Ackroyd, et
al. that the real estate involved here may not be sold
under the judgment obtained by the Appellee because
of its public character and public use, and this for two
reasons, to-wit: First, the statutes of Montana do not
authorize the sale under judgment of public property
necessarily used for public purposes; and, Second, it
is against public policy to allow such property to be
sold under judgment and to thus disrupt the affairs of
a public corporation or make it impossible to function

32

as such. These two contentions will be discussed
together under this subdivision of the argument.

Section 9410, Revised Codes of Montana, 1935, pro-
vides that after a judgment has been docketed:

‘ft becomes a lien upon all real property of the
judgment debtor not exempt from execution in
the county, owned by him at the time, or which
he may afterward acquire, until the lien ceases.
The hen continues for six years, unless the judg-
ment be previously satisfied.”’

The execution statute is Section 9416, Revised
Codes of Montana, which provides that the party in
whose favor a judgment was given may at any time
within six years after the entry thereof have a writ of
execution issued for its enforcement.

It is upon these statutes that the Appellee relies not
only for a len upon the real estate involved but to
support its claim that the said real estate may be sold
under execution. Neither statute, it will be noted, nor
any other Montana statute, provides that the judg-
ment lien attaches to public property necessarily used
for public purposes or that such property may be sold
in satisfaction of a judgment. The said statutes, and
all appurtenant statutes, are general statutes, and no
intention has been manifested thereby, either in ex-
press language or by implication, that public property
necessarily used for public purposes shall be compre-
hended by the statutes.

It is a general rule of law as declared in 59 Corpus
Juris, Statutes, Par. 653, page 1103, that:

33

‘“The state and its agencies are not to be con-
sidered as within the purview of a statute, how-
ever general and comprehensive the language of
such act may be, unless an intention to include
them is clearly manifest, as where they are ex-
pressly named therein, or included by necessary
implication. ”’

And in 19 BR. C. ., Municipal Corporations, Par.
339, the rule is stated to be:

‘It is well settled that when a creditor has
secured judgment against a municipal corpora-
tion, and taken out execution, he cannot levy upon
property of the corporation which is devoted to
public uses * * *. This rule is based upon obvious
principles of public policy, and is not a peculiar
or special privilege of municipal corporations.’’

In 5 American d: English Annotated Cases, Note,
Page 512, it is said:

‘‘ According to the weight of authority, the gen-
eral rule is that property of a quasi-public cor-
poration, essential to the discharge of those public
duties for which it is created, is not subject to
levy and sale on execution in the absence of stat-
utory provisions to that effect.”’

Other general authorities to the same effect as above
are as follows, to-wit:
MecQuillin Municipal Corporations, Vol. 3, Bar.
1160, and Vol. 5, Par. 2500;
17 R. C. L., Levy and Seizure, Par. 43;
23 Corpus Juris, Executions, Par. 109;

34

o9 Corpus Juris, Statutes, Par. 653;

Lewis’ Sutherland Statutory Construction, 2nd
Ed:, Vol. 2ar, ol:

21 Am. Jur., Executions, Par. 457.

The remedy to be applied by the Appellee here is
pointed out in U.S. ex rel. Masslhich v. Saunders, et al.
(C. C. A. 8), 124 Fed. 124 and 126, where the court
says:

‘‘In the enforcement of judgments of the na-
tional courts against municipal and quasi munici-
pal corporations, the writ of mandamus is the
legal substitute for the writ of execution to en-
force judgments against private parties. The
plaintiff in a judgment of the former class has
the same right to the issue and enforcement of a
mandamus commanding the proper officers of the
defendant corporation to make suitable provision
for its payment that the plaintiff in a judgment
of the latter class has to the issue and enforce-
ment of a writ of execution.”’

In the controlling case of Walkley v. City of Musca-
tine, 6 Wall. 481, 18 L. Ed. 930, the court held that
where a judgment against a aty was not paid the
appropriate remedy was by writ of mandamus.

Some of the general principles here involved were
settled by this court in California Iron Yards Co. v.
Commissioner of Internal Revenue (C. C. A. 9), 47
Fed. (2d) 514.

A controlling case also that settles all of the prin-
ciples invoked by the Appellants, Ackroyd, et al. is

30

that of Whiteside v. School District No. 5, et al., 20
Mont. 44, 49 Pac. 445. There Judge Hunt, later a
member of this court, held, as declared by Par. 1 of
the syllabus in the Montana Report, that:

‘‘Inasmuch as the law which provides for liens
of mechanics does not expressly provide for a len
upon school and other buildings such buildings
are not subject to the lien of a subcontractor.”’

We quote from the decision as follows, to-wit:

‘‘Most of the decisions base their reasoning
upon the ground of public policy, and point out
that it is easy to see what detriment might follow
if lands and buildings held for public uses—as,
for instance, common schools—could be sold to
satisfy the debts or defaults of municipal corpo-
rations having the legal title.

In the California case cited above the court
invoked the general doctrine that ‘the state is not
bound by general words in a statute which would
operate to trench upon its sovereign rights in-
juriously affecting its capacity to perform its
functions or establish a right of action against 1t’,
and the court applied the familiar rule of con-
struction heretofore cited by holding that by the
omission in the statute to mention public build-
ings it was manifest from the whole statute of
that state that they were not included.

We believe that under the statute of this state,
construing it according to the rule laid down in
the foregoing cases, it was not intended to give
to a mechanic who is a sub-contractor a lien for
work done or materials furnished in the construc-

36

tion of a public school house. The omission of
the express right to a lien upon such a building
and property shows that it was not intended to
be included within the provisions of the law for
reasons of public policy. It is evident that the
legislature did not mean to disturb this almost
universal rule of statutory construction.”’

The Whiteside case, supra, and the principles set-
tled thereby were not considered by the lower court
in its decision. (T'r. 84 and 85.) It is the contention
of the Appellants Ackroyd, et al. that the Whiteside
case, without more, is controlling and decisive here.
The rule of that case has not been departed from in
Montana in any subsequent decision.

In State v. Blake (Utah), 20 Pac. (2d) 871, the
court held that the property of a drainage district
may not legally be taken from the district under
writ of execution, but that the remedy is by man-
damus.

In People v. San Joaqun Valley Agricultural
Assn., ct al. (Cal.), 91 Pac. 740, the court held that an
agricultural association organized for the purpose of
holding products of a certain territory of the state
is a public corporation created for the local adminis-
tration of the affairs of the state and that its property
is not subject to execution although the statute creat-
ing the association authorizes it to sue and be sued.

In Sherman County Irr. & Water Power & Im-
provement Co. v. Drake, et al. (Neb.), 91 N. W. 512,
the company was a quasi-public corporation organized

37

| to construct a work of internal improvement, namely,
ha canal for irrigating and power purposes. Drake
| recovered a judgment at law against the company and
‘levied an execution upon the flume and part of the
right-of-way of the company, whereupon an action
was brought to perpetually restrain the enforcement
of the execution levy. The court held ‘‘in accordance
with the general voice of judicial authorities’’,
namely :

‘‘In the absence of statutory enactment, the
property of quasi public corporations, like the
plaintiff, cannot be seized and sold upon process
in actions at law.”’’

As stated previously herein the case at bar is not
one in which the Appellants Ackroyd, et al. claim
exemption from execution of the real estate involved.
On the contrary their claim is that no authority of
law can be found in any statute of Montana for either
a lien upon such public property by judgment or for
a sale thereof under execution.

Ee

CONCLUSION.

Regardless of the form the transaction has taken it
is plain that the investment by Bynum Irrigation Dis-
trict in the stock of Teton Co-Operative Reservoir Co.
was for the sole purpose of obtaining a water supply
that was actually needed by the district for purposes
of irrigation. It acquired such water supply, that was
so necessary to enable it to operate as a public corpo-

38

ration, when it took over, in effect, Teton Co-Opera-
tive Reservoir Co., and, through ownership of 80.4%
of the capital stock of that Company, put the district,
through its district commissioners, in a position to
control the works of irrigation of the said Company
and the distribution of water.

A court of equity will hardly give serious considera-
tion to a claim that, under such circumstances, the
property held by Teton Co-Operative Reservoir Co.
and necessarily used as part of the irrigation system,
can be levied upon under judgment and sold under
execution as the property of an ordinary debtor and
Bynum Irrigation District be thus deprived of its sole

source of water supply so that it can no longer func- |

’

tion as a public corporation. ‘‘Equity regards sub- |

stance rather than form.’’ And such a claim should |
be particularly obnoxious in a court of equity, that |

requires those who enter its portals to come with
clean hands, when consideration is given to the fact
that the Appellee, who has made such claim hereto-
fore, knew, from the first, the status of Teton Co-
Operative Reservoir Co. and its exact relation to
Bynum Irrigation District. Thus the Appellee also
knew, for it was charged with knowledge of the law,
that claims and demands cannot be enforced, by len
or levy, against public property necessarily used in
the conduct of the business of a public corporation.
The lower court plainly erred in granting the mo-
tion to dismiss and in rendering judgment accord-
ingly. That judgment should be reversed with direc-

‘
'

39

tions to enter judgment for the Appellants as prayed
for in their bills.
Dated, Billings, Montana,
September 27, 1939.

Respectfully submitted,
STERLING M. Woon,
Ropert E. Cooke,
E’repric MouLton,
By SrTertina M. Woon,
Attorneys for Appellants, James A. Ackroyd,
Dwight S. Brigham, Morris F. LaCroia,
Harle L. Carter, J. Hdward Stevens, and
Frank E. Nelson.